Is convergence happening in your industry? The process of industry convergence can be defined as the reconfiguration of boundaries and dynamics between industries, induced by converging value propositions, technologies and markets.
Industry convergence often presupposes underlying bases of technologies and knowledge to come to share increasingly similar characteristics, that is, allowing one technology from industry A to suddenly be applied in industry B. As observed in a recent MIT Sloan Management Review study of the converging fields of telecommunications, IT, media and entertainment as industries converge “seemingly unrelated businesses suddenly become rivals.” This process radically transforms how all the players generate and capture value.
Convergence presents opportunities for innovation, enabling market access for new entrepreneurial ventures and strategic renewal for large and established companies. Yet only by understanding and anticipating the drivers of convergence and how they impact on the key incumbents in the converging fields, can top managers improve their strategymaking, taking the long-term view, and ultimately allow their firm to reap the potential future rewards (or simply to avoid being disrupted).
Corporate venturing units can play an important strategic role in identifying opportunities or threats in converging industries and in engaging with highly-innovative startups in the newly emerging ecosystem. They are ideally positioned to anticipate and understand the new industry architecture emerging out of convergence. In fact, as convergence is happening throughout the economy, impacting different industrial sectors ranging from pharmaceuticals to financial services,
GCV data shows an increasing number of corporate venturing activities in this space (see Table 1 for an overview of the most prominent convergence deals by the top 10 most active corporate venturing groups in Q1).
Reference
Hacklin, F, Battistini, B and von Krogh, G (2013) Strategic choices in converging industries. MIT Sloan Management Review, 55(1): 65-73